India’s external sector performance remains robust

Reserve Bank of India released the country's balance of payments data for third quarter of this year yesterday, which report indicates that the performance of India's external sector remains strong and the current account deficit has not been challenging in terms of financing.

India has been a large beneficiary of crude oil prices, and the Foreign Direct Investment inflows stay on a strong footing comparatively and support to counter balance the portfolio outflows which were seen in the months off late.

The country's external sector seems well placed and expect it to remain so in the coming quarters. Non-resident Indian (NRI) deposits are increased y 4.0 pct in Q2 of 2015-16 over Q2 2014. Foreign exchange reserves (on BoP basis) declined by US$ 0.9 billion in Q2 of 2015-16.

"Given the recent sharp decline in oil prices, we see rising risks that the current account deficit will be smaller than our projection of USD25bn. We believe underlying growth in India is improving, but it is unlikely to put significant pressures on the current account", says Barclays in a research note.